PDVSA’S Missing Billions

14.07.05 | Vol. 1 No. 4 July 2005 | One of the oldest slogans in politics is "follow the money"
and in Hugo Chavez’s Venezuela that process is getting
more difficult by the day. World Energy Monthly Review has analyzed records from
Petróleos de Venezuela S.A. (PDVSA) and the Venezuelan
Central Bank (BCV), and we found a substantial discrepancy
in the reporting of funds officially going into the Venezuelan
treasury. By our estimate, at least $3.5 billion – money that
should have been deposited into the BCV – has disappeared.
And Venezuelan officials will not (or perhaps cannot) explain
where the cash has gone.

Some of the missing revenue may be due to shipments of
Venezuelan crude to Cuba, a deal that involves barter, not
cash. Chavez gives Fidel Castro oil; Castro gives Chavez
medical doctors, nurses and skilled labor. But the value of
that 50,000-barrel-per-day deal accounts for only a portion of
the missing sum. Furthermore, World Energy Monthly Review’s
calculations suggest that PDVSA’s internal oil production is at
its lowest level in three decades.

There are other questions:

• According to BCV’s director, Dr. Domingo Maza Zavala,
his bank received $1.6 billion per month between January
and April of 2005. It should be getting about $2.7 billion.
That means that every month in Caracas, $900 million
goes missing.

• PDVSA’s payments to foreign suppliers totaled $1.4
billion in the first four months of 2005. That’s a dramatic
increase from the $1.3 billion paid to those suppliers in
2004. Furthermore, the $1.4 billion cost of those imports
was not registered as part of PDVSA’s rotating fund,
which is supposed to be used to finance the company’s
external operations.

• On May 20, Petroleum Minister (and PDVSA head)
Rafael Ramirez apparently confirmed that Venezuela’s
production in the first four months of 2005 averaged 2.623
million barrels per day from all sources. Thus, PDVSA has
abandoned its long-held-but-discredited claim that it was
producing 3.5 million barrels. (It has also claimed that
production was 3.2 million barrels per day.)

• PDVSA’s total 2004 export revenue was about $32.5 billion.
That figure translates into daily exports of about 1.7 million
barrels at about $50 per barrel. If one believed PDVSA’s
claim that it is producing 3.5 million barrels per day, then
the country’s export revenue for 2004 should total more
than $50 billion – and that means the missing revenue is
far higher than the $3.5 billion we cited above. Further, if
one believes that Venezuela is producing 3.2 million barrels
per day, then the total revenue would be $47 billion. Under
any scenario, there are mountains of missing cash.

• If the 2.6 million barrels per day figure is correct – and we believe it is – then PDVSA’s own internal production
has fallen to its lowest level in nearly 30 years. Here’s the
math: Subtract 500,000 barrels per day that come from
operating agreements, and another 617,000 barrels that
come from strategic associations in the Orinoco Belt,
and you have the company’s legacy production, a total of
about 1.5 million barrels per day, the lowest level since
PDVSA’s creation in 1976.

A spokesman for PDVSA told us that neither the company
nor the Venezuelan embassy in Washington would respond to
our questions about these issues. Their lack of a response may
indicate the predicament that Chavez faces: On one hand,
PDVSA wants to show that its production isn’t falling. At the
same time, the Chavez government doesn’t want to brag too much
about oilfield prowess because high production means lots of
cash inflows to the government – and that cash has vanished.

What Are They Hiding?

The lack of transparency in PDVSA’s dealings with the BCV,
its production levels and its export revenue are only arousing
the suspicions about the Chavez Administration. In 2003,
PDVSA discontinued the publication of its annual report,
"Petroleum and Other Statistical Data." The company has
also not published its financial statements, even though it is
required to do so by SEC rules. (It is required to do so because
PDVSA owns significant assets in the United States, including
the Citgo gasoline retail chain, and has production-sharing
agreements with several U.S. companies.)

The first real glimpse into PDVSA’s condition came on
May 20, 2005, when the company finally released its oil
production and export figures. But instead of quieting the
Chavez opposition, these statistics only fanned the flames.
César Rincones, head of the National Assembly Comptroller’s
Commission, said he is determined to find out where the
money has gone.

Rincones should follow the money trail wherever it leads.
It is becoming clear that the problem today in Venezuela is
not Chavez’s politics. He’s the president and he can lead the
country wherever he likes. The problem is one of accounting,
and therefore, accountability. Unless or until a full accounting
is made for the shortfalls at the BCV, scrutiny of the Chavez
administration will remain intense.